Truck rentals down by 2% after drop in diesel prices

According to the Indian Foundation of Transport Research and Training (IFTRT), A INR 2 per litre drop in diesel prices on August15-16 has led to a fall in truck rentals.

In an update, it said that the arrival of fruits and vegetables into vegetable wholesale markets were down by 25% and there were lower cargo arrivals from factory gates leading to 3-4 days lag in getting return load on long distance routes, some of which were disrupted due to heavy rains in most parts of the country.

Truck rentals down by 2% after drop in diesel prices

It added that truck rentals had dropped by 1.5-2% during the first week of August 2016. Moreover, when truck markets opened after two days of holiday, truck rentals for medium and long haulage are being quoted further lower by 2% in cities across important freight centers due oversupply of trucks. Truck sales may drop by at least 15-20% for August.

IFTRT is also apprehensive about truck sales as fleet owners expect an adverse impact of the implementation of goods and services tax regime on their fleet utilization.

“As the crude oil price basket of PSU oil marketing companies (OMCs) has been around USD 43/bbl, the OMCs obliged with INR 2/ltr cut in diesel price with August 2016 right on the heels of INR 2.01/ ltr diesel price cut on 1st August 2016.

Monthly revenue of truckers in the last 12 weeks or so have taken a plunge. It has a direct bearing on heavy duty truck sales, which predominantly operate on medium and long haulage. So far, the IFTRT’s interface with auto makers, dealers, truck financiers leading NBFCs and banks has only confirmed the fears that till mid-August 2016, actual funding has been lower by 40-50% and for the remaining part of current month the immediate convertible leads for truck financing are pretty low.

Truck sales generally for the past year and half till June 2016 have largely led initially by low base effect, huge discounts by dealers, lower fund cost and liberal loan facilities, subvention to financiers by dealers and later most importantly the pressure of various regulatory changes pushed up sales of M&HCV truck sales.

Now, truckers are waiting for higher consumer spending on the back of implementation of seventh Pay Commission, good post-monsoon harvest in in October, and the festival season.

This will boost the cargo availability and help truckers have better fleet utilization over the subsequent few months.

IFTRT said that a recovery in truck rentals is necessary for increasing the truck sales.